What Is a Waiver of Coinsurance Clause?
Let me explain what a waiver of coinsurance clause really means for you as a policyholder. It's a specific provision in your insurance contract that says the insurer won't make you pay coinsurance—a percentage of the total claim—under certain conditions.
You'll find these clauses most often in property insurance, but they can also show up in health insurance and, though it's rare, in other types of coverage.
Key Takeaways
- A waiver of coinsurance clause outlines conditions where you, the policyholder, don't have to cover part of a claim.
- These clauses apply to property, health, or other insurance types.
- Expect higher premiums if your policy includes this waiver, as it shifts more risk to the insurer.
How a Waiver of Coinsurance Clause Works
If you have property insurance, you might only get 80% coverage, leaving you to pay the remaining 20% as coinsurance if a valid claim arises. A waiver of coinsurance clause changes that by letting you off the hook for sharing those costs.
Insurers generally waive coinsurance only for smaller claims, but some policies extend this to total losses. The exact wording can differ between companies, but the core idea remains the same. Remember, you'll likely pay more in premiums for this added protection, since it increases the insurer's exposure.
It's important to note that insurance companies typically only waive coinsurance for fairly small claims.
Example of a Waiver of Coinsurance Clause
This clause becomes especially useful in a total loss scenario. Suppose your policy requires insuring at least 80% of your property's value. For a $200,000 building, that means at least $160,000 in coverage.
If a total loss occurs, the policy pays $160,000, and you'd cover the $40,000 gap. But with a waiver of coinsurance, the insurer handles the full $200,000, saving you that out-of-pocket expense.
Special Considerations
Beyond property, you might see a waiver of coinsurance in health insurance or occasionally other products. For instance, in an 80/20 health plan, you're responsible for 20% of costs after the deductible, with the insurer covering 80%.
A waiver could eliminate your 20% share in specific cases, like an $80,000 surgery where it saves you $16,000. However, these waivers in health insurance usually apply to smaller, prepaid services rather than major procedures.
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